Details have been released of the Coronavirus Business Interruption Loan Scheme (CBILS) that the Chancellor, Rishi Sunak, announced last week to assist SME’s. Loans of up to a maximum of £5 million (an increase from the initial figure of £1.2 million) will be provided under the CBILS.
What finance products will the CBILS cover and who is eligible?
The CBILS will cover a wide range of finance products including term loans, overdrafts, invoice finance and other asset based lending. The CBILS will follow the same format as the Enterprise Finance Guarantee (EFG) scheme – the facilities will be provided by an approved lender, which will be guaranteed by the Government.
In addition, the Government will cover the first 12 months interest payments. Finance terms will be from three months to 10 years.
However, to be eligible to benefit from the CBILS, the small business must meet certain criteria, including:
- Be UK based, with turnover of no more than £45 million
- Must be within an eligible sector.
- Not have received State aid in excess of €200,000.
- Must be unable to meet the lenders normal lending requirements, but would be considered viable in the longer term.
Key terms and features?
The key terms and features of the scheme are as follows:
- There will be no fee to use the CBILS scheme – the lenders will pay a fee to access the scheme.
- Loans of up to £250,000 at the discretion of the lender, do not have to be secured.
- Primary Residential Property cannot be taken as security.
- The scheme will run for an initial period of six months.
- The amount of funding available will not be capped. The Government says that it will be “demand led”.
- Open to sole traders and freelancers as long as they have operated through a business account.
Demand for access to the scheme will be extremely high and the lenders will be inundated by requests. The banking system is not set up to deal with such a high demand and, therefore, all businesses will need to be patient.
If the funding is not immediately required, the lenders have asked businesses not to apply in order to ease the pressure on them and to allow those that are in more need to access it. The scheme is “demand led” and is not capped, so funds will continue to be made available as long as they are needed.
Funding will only be provided to businesses that would have been considered by lenders as viable lending propositions before the Covid-19 pandemic. The lenders still need to go through their normal lending processes (but there is hope that this can be streamlined somehow).
Therefore, the lender will require all relevant financial information relating to your business including historical financial information, management accounts and forecasts. In order to save time and resource and to give you an opportunity to access this scheme, you need to go to your bank prepared with this information. If you do not, it is likely that another business, that has provided the required information, will take priority.
If you do not have a finance director or other senior accounting individual, seek advice and assistance from an accountant to help you prepare the necessary information.
How can Nelsons help?
At Nelsons, we have a specialist Banking and Finance team that is available to assist and provide advice. Please contact David or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.